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What is a product transfer mortgage?

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If you qualify for a mortgage product transfer, you should be able to transfer your current mortgage onto a better deal with the same lender. You might have noticed your current lender advertise a new rate or a deal with lower fees or a cashback incentive and that can be some good reasons for you to ask about transferring your mortgage. 

 

It’s not uncommon for homeowners to look into transferring their mortgage toward the end of their current contract’s fixed rate period. If your fixed rate is about to end, you’ll likely roll onto your lender’s standard variable rate and that’s usually higher than the fixed rate. To avoid paying more, you might ask your lender what other deals they have and switch onto one of those. 

 

If you’re considering moving your mortgage, you might as well look at the other lender’s rates and deals too. By switching to another one of your lender’s deals, you could miss out on a cheaper or more flexible deal elsewhere.

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How do product transfer mortgages work?

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If you’re not applying to borrow any more money, a product transfer mortgage is pretty simple. 

 

Generally speaking, the loan amount and mortgage term aren’t altered when you transfer a mortgage and that can result in a faster process, with some homeowners being able to switch their deal in a matter of days. 

 

There’s no new house valuation which can also save a lot of time, making this type of arrangement usually quicker than a remortgage. 

 

As the terms of the mortgage arrangement aren’t changing, your lender might not carry out a credit check either and that can be great news if you’re somebody whose circumstances have changed from when you initially took out a mortgage. 

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Reasons to transfer your mortgage product rather than switch 

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• Less paperwork

• Less stages of the process

• Fewer people involved

• Often no credit check

• Fewer fees

• No need for a new property valuation

• If your current mortgage deal includes early repayment charges, you wouldn’t have to pay them when transferring to the same lender

• Could reduce monthly repayments by going from your lender’s standard variable rate to a fixed-rate mortgage

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Will my current lender be able to offer me a better deal than a new one?

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A small number of lenders look favourably on borrowers that continue to stay with them out of loyalty. It may be the case that to keep your custom, your current lender could offer you a preferential rate when you transfer to a new mortgage product with them.

Furthermore, depending on your lender’s terms and conditions, if your initial mortgage is at a lower interest rate, you might be able to carry on paying that low rate through your new agreement. This is great if interest rates have increased since you first took the mortgage out.

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What are the disadvantages of transferring a mortgage product rather than remortgaging?

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• Transferring your current mortgage without looking at the alternative lenders and their deals is fairly restrictive. 

 

• Your current bank or lender isn’t going to give you impartial advice or let you know about lower rates elsewhere.

 

• You could miss out on a better deal overall by simply going to your lender and moving onto a similar agreement and that could prevent you from reducing your monthly mortgage repayments to a lower amount.

 

• Sometimes, if you want to borrow more money on top of your current mortgage, any additional funds are likely to be charged at a different rate. This may mean that, in effect, you have two mortgages/products with different rates and different end dates. This can make it tricky if you're wanting to remortgage with a different lender so always seek professional help.

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Can I borrow more when I transfer my mortgage?

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Yes that might be possible, though it will depend on your own circumstances including how much equity you have, your credit history and mortgage repayment history. Borrowing more when transferring your mortgage is common but it relies on your ability to prove that you can afford the new mortgage repayments under the new terms. 

 

Borrowing more through a product transfer mortgage is known as a further advance and the process isn’t as uncomplicated as a straight product transfer. 

 

There will likely be additional questions about your affordability concerning your income and outgoings, a credit check to assess whether you’ve made repayments in the past on time and there may be a valuation on the property. 

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How will my affordability be tested if I want to borrow more?

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Your situation now might be different to what it was when you initially took out your mortgage and that can make a difference as to how much you can borrow and whether you can get a further advance at all. To check you’re eligible for the new agreement, your current lender will look at your:

 

• Employment status

• Income 

• Outgoings 

• Age (how close you are to retirement)

• Your credit history

• The amount of equity you have in your home

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Should I do a product transfer or remortgage?

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A remortgage would allow you to move onto a new deal with a completely new lender and that could benefit you if the terms of the new contract are better. The downside to doing that is that there may be fees to pay and the process can sometimes be a little longer but that will depend on your current lender and the other professionals involved. 

 

You can work out whether the cost of any fees like exit fees or early repayment charges is an amount that makes remortgaging too expensive and not worth it by comparing any fees against any savings made with a new lender. It can be much quicker to ask a mortgage broker to do this for you because they’ll know what to look out for and exactly what to factor in when doing the calculations. 

 

It may be the case that it works out financially better for you to do a simple product transfer mortgage, which can often involve no fees but then again, every lender and every situation is different. Your best bet if you want to know which route is better for you is to compare all the options with an expert.

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Product transfer mortgage advice 

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Don’t rush into a decision without carefully checking what’s involved, what your new repayments will be and for how long. 

 

A mortgage is probably one of your biggest financial commitments and if you’re unsure about where to get the best deal, have a reviewed mortgage broker show you what options are available to you and explain the pros and cons of each. Doing so could just save you some money. 

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